28 April 2015Rishi Joshi, associate member of the Institute of Chartered Accountants of India, analy...

1. Mirror, mirror on the wall, please show the purpose to all
28 April 2015
Rishi Joshi, associate member of the Institute of Chartered Accountants of India, analyses recent
controversy and litigation on the issue of indirect share transfers.
An indirect transfer occurs when an investing foreign company (IFC) invests in a target company
(TC) indirectly through an interposing offshore company or companies (IC) solely incorporated for
channeling the investments in the TC. The subsequent stake sale in the TC achieved through the
disposal of the shares of the IC and realisation of the gains arising from the disposal of the shares of
the IC goes untaxed in the source state where the TC is located.
In the wake of various indirect asset transfers effected in transactions around the world with huge
tax implications, quite a few of the non-OECD countries have brought legislative changes to deal
with the situation, which may be seen as an acknowledgement that source countries are being
fleeced of revenue due to them.
In one of the recent cases in 2012, the Mozambican government approved completely...
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